The EEOC recently announced reaching its largest settlement in the last 2 years in EEOC v. Patterson-UTI Drilling Co. LLC, No. 15-CV-600 (D. Colo. Mar. 24, 2015). In this case, Patterson-UTI agreed to settle a race and national origin pattern or practice claim brought by the EEOC for $12.2 million. This settlement almost equals the approximately $13 million the EEOC received in litigation settlements for the entirety of its Fiscal Year 2014, and represents more than half of the $22.5 million it recovered, in total litigation settlements and verdicts, during the same period. The high value of this settlement comes as no surprise. As we reported in our 2014 EEOC-Initiated Litigation Report, found here, the EEOC is focused on achieving high value settlements and verdicts this year to make up for its low recoveries in 2014. This case also confirms another trend we also reported in our 2014 EEOC-Initiated Litigation Report – the EEOC is focused on bringing systemic, class-like cases.

Case Background

The EEOC received a number of charges of discrimination filed by employees and former employees of Patterson-UTI, a Texas-based oil and gas drilling company, alleging discrimination based on race or national origin. The EEOC concluded that there was reasonable cause to believed that Patterson-UTI engaged in nationwide discrimination against its minority employees.

On March 24, 2015, the EEOC filed suit against Patterson-UTI, alleging that individuals of Hispanic, Latino, African American, American Indian, Asian, and Pacific Islander race and/or national origin were subject to harassment, a hostile work environment, and disparate treatment. Specifically, the EEOC alleged that Patterson-UTI’s minority employees were subject to racial and ethnic slurs, jokes, and comments and verbal harassment and intimidation. The EEOC further alleged that Patterson-UTI’s minority employees were relegated to lower-level positions, were denied training, and were subject to disparate treatment in discipline. Finally, the EEOC alleged that Patterson-UTI retaliated against employees who complained about discrimination or harassment. The EEOC alleged that Patterson-UTI engaged in this prohibited conduct on a nationwide basis.

Settlement Agreement

Patterson-UTI and the EEOC entered into a settlement on the same day the Complaint was filed. To that end, the parties filed a Proposed Consent Decree with the Court. Under the terms of the settlement as outlined in the Proposed Consent Decree, Patterson-UTI agreed to pay $12,260,000 to a settlement administrator to provide compensation to Patterson-UTI’s purportedly aggrieved minority employees. Such compensation will be available to any minority employee who worked for Patterson-UTI from January 1, 2006, to the date the Proposed Consent Decree is entered.

In addition to agreeing to provide monetary relief, Patterson-UTI also consented to wide-ranging equitable relief. Among other things, Patterson-UTI agreed to be enjoined from engaging in any employment discrimination practice which discriminates on the basis of race or national origin. It agreed to develop new Equal Employment Opportunity policies and to annually train its employees on its Equal Employment Opportunity policies. It also agreed to create a Vice President position dedicated implementing the Consent Decree and ensuring Patterson-UTI’s employees were protected from unlawful discrimination.

Implications For Employers

This settlement confirms what we predicted in our annual EEOC-Initiated Litigation Report – the EEOC is going to focus this year on recovering large settlements and verdicts this year to try to make up for low recoveries in fiscal year 2014. Employers who find themselves the subject of EEOC conciliation or litigation this year can expect that the EEOC will demand larger recoveries than it has in prior years. Moreover, employers can expect that the EEOC will continue focus on large-scale, systemic litigation. Whether this focus will result in more successes like it achieved in this case or defeats like it received last year in cases like EEOC v. Kaplan Higher Educ. Corp., 748 F.3d 749 (6th Cir. 2014), remains to be seen. Stay tuned.

In 2011, the U.S. Equal Employment Opportunity Commission (EEOC) invited the public to comment on how its significant regulations could be improved by modifying, streamlining, expanding, or repealing them. Since opening its doors for public comments, the EEOC has received 93 comments. The EEOC summarized and responded to these comments, which are publicly available on the EEOC website. The goal is to make the agency’s regulatory programs more effective in achieving its objectives and less burdensome to the public. Consistent with its practices in 2011, the EEOC again published a notice asserting that it welcomes public comment on a variety of regulatory review topics within the EEOC’s jurisdiction. Specifically, the EEOC seeks public comment on the following:

Which regulations and/or reporting requirements should the EEOC consider for review, modification, streamlining, expansion or elimination, and why?

Are there alternative regulatory approaches for particular EEOC regulations and/or reporting requirements that would reduce the burden on regulated entities while maintaining the same level of protection for applicants, employees, employers, employment agencies, federal agencies, and unions? If so, please describe.

How Can Employers Have Their Voices Heard By The EEOC?

Considering the level of public feedback when the EEOC opened its regulations for public commenting in 2011 and the EEOC’s response to that feedback, employers are encouraged to submit comments if they would like to weigh in on EEOC regulations. Between now throughApril 20, 2015, comments or suggestions may be submitted to Public.Comments.RegulatoryReview@eeoc.gov. Remember, the EEOC may make comments public, so please do not submit comments that include information you don’t want to make public.

In Downing v. Riceland Foods, Inc., Case No. 4:13-CV-321 (E.D. Mo. Mar. 19, 2015), Judge Catherine D. Perry of the U.S. District Court for the Eastern District of Missouri certified a class of former MDL plaintiffs and plaintiffs’ counsel who brought suit against one of their co-plaintiffs seeking compensation for MDL work product that the co-plaintiff had used in other litigation. While not a workplace class action, this case serves as a warning that, in certain circumstances, employers could be liable for the legal fees and costs of co-defendants or co-plaintiffs. It also provides employers with a potential tool to recover attorneys’ fees from co-defendants or co-plaintiffs if they use common work product in other litigation.

Case Background

After Bayer introduced genetically modified rice into the United States rice supply, rice farmers and others involved in the rice business brought more than 200 suits against Bayer and other entities, including Riceland Foods, in state and federal courts. Id. at 2. Riceland Foods filed cross-claims against Bayer and filed two other suits – one in state court and one in federal court – against Bayer. Id. at 3.

The federal cases were consolidated in an MDL. Id. at 2. To make the MDL manageable, the MDL court appointed lead counsel and set up a trust from which attorneys’ fees and costs would be paid to all the MDL plaintiffs’ counsel in the event of a recovery against Bayer. Id. at 3. The order did not apply to recoveries in state court cases absent consent or an order by the state court. Id. Under the order, Riceland Foods was to pay 10% of any recovery against Bayer to the trust. Id.

Over the course of five years, the MDL plaintiffs’ counsel drafted a consolidated complaint, opposed Bayer’s dispositive motions, reviewed more than 2.8 million pages of documents, and took and defended a total of 167 depositions. Id. at 3-4. They then conducted three bellwether trials, all of which resulted in plaintiffs’ verdicts. Id. at 4.

In separate state court litigation, Riceland Foods received $92 million from Bayer in a settlement. Id. at 3. The Downing plaintiffs sued Riceland Foods to recover ten percent of that recovery on unjust enrichment and quantum meruit theories, claiming that Riceland Foods used the work performed by the MDL plaintiffs’ counsel to achieve that settlement. Id. at 3, 5. They sought to certify, as a class, all persons and entities that provided or paid for services in the MDL action. Id. at 5-6.

The Court’s Ruling

The Court certified the proposed class action, stating that “[t]his action is uniquely suitable for class certification.” Id. at 2. The Court first found that the proposed class was numerous because it consisted of more than 30 law firms and more than 5,000 MDL plaintiffs. Id. at 7-8.

The Court then found that the proposed class action satisfied the commonality requirement. Id. at 9. Specifically, the Court reasoned that the class’s claims would face the common legal question of whether an unjust enrichment and quantum meruit action could be “based upon the use of an attorney’s work product by a non-client.” Id. at *8-9.

The Court found that typicality was established because “each of the proposed class members would have essentially the same grievances as the named plaintiffs – that Riceland had unjustly benefitted from work for which they had paid or provided.” Id. at *10. The Court also found that the class representatives and counsel were adequate. Id.

The Court then turned to deciding whether Rule 23(b)(3)’s requirements – that common questions predominate over individual questions and that class resolution is superior to other available resolution methods – were met. The Court held that common questions would predominate as to both the unjust enrichment and quantum meruit claims because the class members jointly incurred expenses that conferred benefits on Riceland Foods. Id. at 19. While agreeing that there would need to be “a great number of factual determinations related to [Riceland Foods’s] use of work product and value received,” the Court pointed out that those inquiries would “focus on what Riceland did and what benefit it received” which would be “issues that are common to the class.” Id. at 20.

The Court finally determined that class litigation was superior to other available methods for the fair and efficient adjudication of the controversy. Id. at 21. The Court concluded that the class members did not have an interest in individually pursuing separate actions and that “any difficulties in managing th[e] class action pale in comparison to the alternative.” Id.

Implications For Employers

While this case is not a workplace class action, it serves as both a warning and a notice of a potential opportunity for employers in multi-plaintiff or multi-defendant litigation. It serves as a warning that employers who are co-plaintiffs or co-defendants in cases could be on the hook for attorneys’ fees and expenses when they use work product from that litigation in related litigation. While this case involved a co-plaintiff who recovered money in another lawsuit, the theory of recovery in Downing could apply to the successful defense of a related lawsuit. It also provides notice of a potential opportunity for employers to recover fees and costs from co-defendants and co-plaintiffs when those co-defendants and co-plaintiffs use common work product in related litigation. It further can be used to show that the class action mechanism can be used in such suits if there are enough co-defendants or co-plaintiffs.

On March 18, 2015, in EEOC v. Global Horizons, Inc., et al., Case No. 2:11-CV-03045, Judge Edward F. Shea of the U.S. District Court for the Eastern District of Washington ordered the EEOC to pay defendants Green Acre Farms, Inc. and Valley Fruit Orchards, LLC (collectively “Grower Defendants”) their reasonable attorney’s fees and costs incurred in defending against the EEOC’s meritless lawsuit. Judge Shea’s scathing opinion chastised the EEOC for: (1) failing to conduct an adequate investigation to ensure that Title VII claims could reasonably be brought against the Grower Defendants; (2) pursuing a frivolous theory of joint-employer liability; (3) seeking frivolous remedies; and (4) disregarding the need to have a factual basis to assert a plausible basis for relief under Title VII against the Grower Defendants.

This is a significant opinion for employers who are currently litigating against the EEOC, as it makes clear that the EEOC should be and will be held accountable for brining unfounded or baseless lawsuits against employers.

Factual Background

In 2004 and 2005, Global Horizons, Inc., a staffing company, brought workers from Thailand to the United States through the H-2A visa program to work on the Grower Defendants’ farms. Id. at 7. A number of these workers absconded from the farms to California where they filed charges of discrimination with the EEOC alleging that Global and the Grower Defendants discriminated and retaliated against them based on their national origin. Id.

Between 2009 and 2010, the EEOC conducted a scant investigation of the charges. The EEOC interviewed some of the workers, but many of the workers indicated that the Grower Defendants never subjected them to unlawful or improper treatment. The EEOC also received information from Grower Defendants, including position statements where the Grower Defendants argued that they were not the workers’ employer (Global was); that the charges were untimely; and that the allegations in the charges were too vague. Id. at 10. The Grower Defendants also made multiple requests for further information regarding the bases for the charges, but the EEOC never provided this information. Id.

In August and September 2010, the EEOC issued letters of determination, finding that the Grower Defendants discriminated against the charging parties and a class of similarly situated individuals on the basis of their national origin. Id. at 16. The EEOC sent the Grower Defendants a conciliation proposal demanding significant monetary relief and injunctive relief. Id. at 17. The Grower Defendants again requested information that supported the bases for the charges and the EEOC’s monetary demand, but the EEOC refused provide any further information. Id. In September 2010, the EEOC determined conciliation had failed, and, in April 2011 the EEOC filed suit. Id. at 18.

The Grower Defendants moved for summary judgment on the EEOC’s claims. In May 2014 the Court granted summary judgment in the Grower Defendants’ favor, finding that the EEOC failed to present evidence to establish a triable issue of fact that the Grower Defendants violated Title VII. Id. The Grower Defendants subsequently filed a motion for attorneys’ fees and costs.

The Court’s Ruling

In granting the Grower Defendants’ motion for attorneys’ fees and costs, the Court considered “the totality of the information possessed by the EEOC when it filed the lawsuit in order to determine if the filing was reasonable, frivolous, or without foundation.” Id. at 5.

The Court scrupulously analyzed the EEOC’s pre-suit investigation, finding multiple failures on the part of the EEOC. The Court determined that the EEOC failed to provide the Grower Defendants basic information regarding the Thai workers’ allegations, despite their numerous requests. The Court noted that the EEOC failed to consider or react to statements by some of the Thai workers that the Grower Defendants did not treat the Thai workers unfairly, and treated them the same as the Latino workers. Id. at 26. The Court highlighted the EEOC’s failure to interview any of the Grower Defendants’ managers, supervisors, or owners. The Court also found that the EEOC failed to take simple steps to identify and clarify which farm a worker experienced the claimed discriminatory treatment. Id. at 26. The Court noted that the EEOC was well aware of these deficiencies in its investigation, because counsel for the Grower Defendants repeatedly advised the EEOC of these issues. Id.

In addition, the Court found it troubling that the EEOC refused to examine Global’s invoices and other documents that the Grower Defendants had repeatedly offered to the EEOC, until after the start of litigation. Id. at 25. Equally as troubling to the Court was the EEOC’s failure to gather information to support a plausible finding that the Grower Defendants were joint employers with Global, including evidence that the Grower Defendants either (1) discriminated against a Thai worker or (2) knew or should have known that Global discriminated against a Thai worker and failed to take any remedial measures. Id. at 28. Finally, the Court noted that none of the information discovered by the EEOC in its investigation reasonably supported the high damages demands the EEOC made during conciliation. Id. at 27. The Court indicated that it was “unsurprising” that the Grower Defendants’ declined the EEOC’s conciliation proposal “in light of the vague and factually unexplained charges.” Id.

Based on its review of the EEOC’s investigation, the Court held that the information in possession of the EEOC “clearly did not justify the filing of Title VII claims against the Grower Defendants on specific Thai worker’s behalf.” Id. In short, the Court found the lawsuit “baseless, unreasonable, and frivolous” and the award of attorneys’ fees appropriate. Id. at 24. The Court ordered defense counsel to submit their fee request per the ruling.

Implication For Employers

This ruling is extremely important for employers. Not only does it hold the EEOC accountable for its conduct during its pre-suit investigation, but also it serves as a reminder to all employers to make sure that they engage with the EEOC during the pre-lawsuit investigation and conciliation process, sufficiently documenting their efforts to obtain information and communicate with the EEOC.

The decision is also another significant sanction award against the EEOC. Critics of the Commission are apt to point to the decision as yet another example of the problems with the EEOC’s litigation enforcement program.

In Baker v. Microsoft Corp.,No. 12-35946, 2015 U.S. App. LEXIS 4317 (9th Cir. Mar. 18, 2015), the U.S. Court of Appeals for the Ninth Circuit considered whether to adopt a rule creating a principle of comity between different federal district courts under which denial of class certification in one district court would create a rebuttable presumption in other district courts that denial of class certification was the correct result. While the Ninth Circuit did not decide the issue explicitly in this non-workplace class action, employers nonetheless can use this proposed principle when attempting to defeat class or collective action certification bids in federal court where similar class or collective actions brought in other federal district courts have been denied certification.

Case Background

The plaintiffs brought a putative class action against Microsoft, claiming that Microsoft’s Xbox had a design defect. Id. at 3-4. Microsoft moved to dismiss the class allegations, and the district court granted that motion. Id. at 3.

The district court found that a putative class action had been filed against Microsoft in another district court with claims similar to those in the Baker action. Id. The district court then decided to apply the principle of comity between federal district courts as adopted by the American Law Institute in 2010. Id. at 10. Under this principle of comity, “a prior denial of class certification on the same subject matter by a different district court judge [is] given a rebuttable presumption of correctness.” Id. Finding that the Baker plaintiffs had not overcome this rebuttable presumption of correctness, the district court dismissed the class allegations. Id. Plaintiffs subsequently appealed.

Ninth Circuit’s Opinion

The Ninth Circuit did not decide whether the principle of comity should apply to class actions filed in different federal courts. Rather, the Ninth Circuit found that the prior putative class action on which the district court relied used a legal standard that had been overruled by the Ninth Circuit. Id. at *20-21. It thus found that the district court’s decision was erroneous regardless of whether the comity principle were valid. Id. at 21.

In a concurring opinion, Judge Carlos T. Bea persuasively argued that the Ninth Circuit should adopt the principle of comity rather than leaving the question for another day. Id. at 22. Judge Bea reasoned that “whether or not the class is certified is usually the most important ruling in such a case; once a class is certified, plaintiffs who brought claims of even dubious validity can extract an ‘in terrorem’ settlement from innocent defendants who fear the massive losses they face upon an adverse jury verdict.” Id. at 31 (citing AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1752 (2011)). He pointed out that “[i]n light of the minimal costs of filing a class complaint, an obvious strategy suggests itself: keep filing the class action complaint with different named plaintiffs until some judge, somewhere, grants the motion to certify. So long as such a decision is reached while the plaintiffs who have not yet filed are numerous enough to justify class treatment, the plaintiffs will have a certified class that they can use to extract an in terrorem settlement.” Id. at 32.

Balancing this concern against Smith v. Bayer Corp., 131 S.Ct. 2368 (2011), in which the Supreme Court held that individuals who are not before a district court cannot be bound by its judgment, Judge Bea asserted that there was a need to create a rule that would provide district courts “a way to clear their dockets of questionable successive class certification requests, while ensuring that putative class members who have unearthed new evidence or new law in favor of certification, or clear error in the earlier ruling, not be foreclosed by the failed efforts of their predecessors.” Id. at 34. He therefore proposed adopting a rule whereby there would be “a presumption of correctness to earlier denials of certification that can be rebutted by a showing of changed factual or legal circumstances, or earlier clear error.” Id. Judge Bea then applied this rule and held that the district court erred in dismissing the class claims in Baker because there had been a change in the law after the case the district court in Baker relied upon was decided. Id. at 36.

Implications For Employers

While not a workplace class action, this ruling provides employers with a potential argument to combat successive class or collective actions. Even though the principle of comity between different federal district courts has not yet been adopted – or rejected – by the federal circuits, it has been adopted by the American Law Institute and endorsed by Judge Bea of the Ninth Circuit. In addition, Judge Bea’s excellent analysis of why comity should be adopted should prove helpful for employers crafting their own arguments encouraging courts apply the principle. With this argument now available, we expect the issue to be decided in one of the federal courts of appeal in the near future. Stay tuned.

On March 16, 2015, in EEOC v. Beverage Distributors Co., LLC, No. 14-1012 (10th Cir. 2014), the U.S. Court of Appeal for the Tenth Circuit held that the U.S. District Court for the District of Colorado erred by providing improper jury instructions on the direct-threat defense under the Americans With Disabilities Act (“ADA”). In rendering its decision, the Tenth Circuit clarified the direct-threat standard in a manner favorable to employers. The ruling is instructive for all employers involved in ADA litigation with the EEOC.

Case Background

A former employee of Beverage Distributors Corporation filed a charge of discrimination with the EEOC after he was unable to secure employment in a new position with the company. The employee was legally blind. After his original position with Beverage Distributors was eliminated, he was able to secure a new job with the company. However, his new employment was conditioned upon passing a physical examination. Although he passed the physical exam, the examining doctor stated that the employee would require workplace accommodations to mitigate the risks from his impaired vision. Beverage Distributors concluded that it could not reasonably accommodate his conditions and rescinded the job offer. The employee subsequently filed a charge of discrimination with the EEOC against Beverage Distributors. The EEOC then sued Beverage Distributors, on the employee’s behalf, under ADA.

At trial, amongst other things, Beverage Distributors asserted that the employee’s impaired vision created a significant risk of harm to him and others and no reasonable accommodation could reduce or eliminate that risk. The jury found that Beverage Distributors was liable for discrimination and that the employee’s condition did not pose a direct threat. Beverage Distributors appealed to the Tenth Circuit, arguing that the direct-threat jury instruction constituted reversible error.

The Decision Of The Tenth Circuit

The Tenth Circuit ruled that the direct-threat jury instruction constituted reversible error because the district court inaccurately conveyed the direct-threat standard to the jury. Under the ADA, an employer may assert as an affirmative defense to a claim of discrimination, that it declined to hire an individual because the individual posed a “direct threat to the health or safety of themselves or others.” Id. a 4. “A direct threat involves a significant risk of substantial harm to the health or safety of the person or others that cannot be eliminated or reduced by reasonable accommodation.” Id.

The Tenth Circuit reasoned that direct-threat instruction, as delivered by the district court, did not accurately convey the direct-threat standard because it failed to communicate that proof of an actual threat was unnecessary. The Tenth Circuit reasoned that Beverage Distributors should have avoided liability “if it had reasonably believed the job would entail a direct threat.” Id. at 6. It should not have been required to prove that the employee posed an actual direct threat. The jury instruction overstated Beverage Distributors’ burden. Further, the second portion of the jury instruction – which stated that the jury was to consider the reasonableness of Beverage Distributors’ belief regarding the existence of a direct threat – did not cure the error because the jury was never told why it was to consider the reasonableness of what Beverage Distributors thought. Therefore, the Tenth Circuit concluded that the error was not cured by the instruction regarding the reasonableness of the company’s subjective belief. The Tenth Circuit held that it had to reverse the jury’s verdict, because the jury could have been misled by the erroneous instruction.

Implications For Employers

This is a significant case in that it clarifies the direct-threat standard in a manner that is favorable for employers. As illustrated above, the key inquiry for the defense is the reasonableness of the employer’s belief regarding the direct-threat, and not whether there was in fact a direct threat posed. Employers and defense lawyers should take notice of this ruling and add it to their tool box when litigating cases under the ADA cases.

On March 13, 2015, the Solicitor General of the United States filed an amicusbrief opposing the petition for writ of certiorari filed in Spokeo, Inc. v. Robins, No. 13-1339 (U.S.). The Spokeo petition poses a question with a significant impact on the future scope of consumer and workplace-related class actions: whether Congress can confer standing on a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation? To date, ten different amicus briefs have been filed urging the Supreme Court to grant review.

Case Background

In July 2010, Plaintiff Thomas Robins filed a purported class action under the Fair Credit Reporting Act (“FCRA”) against Spokeo, Inc., a search engine that compiles publicly available information on individuals into a searchable database. Robins alleged that the search results associated with his name included inaccurate information about him, in violation of the FCRA. Robins did not allege that he suffered actual damages, but only that he was entitled to statutory damages because the FCRA created a private right of action where inaccurate consumer information is reported. The district court dismissed Robins’ complaint, finding that a mere violation of the FCRA does not confer standing “where no injury in fact is properly pled.” 2011 WL 11562151, at *1. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.” 742 F.3d 409, 413.

In May 2014, Spokeo filed its petition for writ of certiorari to the U.S. Supreme Court. Spokeo posed this question: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.” Spokeo’s petition identified a circuit split. The Fifth and Sixth Circuits agree with the Ninth Circuit’s Spokeo decision and permit plaintiffs to maintain lawsuits without “injury-in-fact” and based solely on an alleged statutory violation. The Seventh Circuit also has signaled that it agrees with this position. In contrast, the Second, Third and Fourth Circuits have held that Congress cannot create standing by statute alone, and the mere deprivation of a statutory right is insufficient to confer standing.

The Solicitor General Opposes The Grant Of Certiorari

In October 2014, the Supreme Court invited the Solicitor General to file an amicus brief on behalf of the United States. The Supreme Court frequently follows the Solicitor General’s recommendation to grant or deny certiorari. In its opposition to certiorari, the Government essentially recommends that the Supreme Court avoid the broader question of Congressional power to create statutory standing and instead focus on the specifically alleged injury in Spokeo – the public dissemination of inaccurate personal information – and the specific statute at issue – the FCRA. The Government’s position is that a concrete harm exists where a defendant unlawfully disseminates inaccuratepersonal information. Although the Second, Third and Fourth Circuits have rejected the concept of “statutory standing,” they each did so under other federal statutes.

Implications for Employers

Given the Solicitor General’s recommendation, the Supreme Court may deny certiorari and maintain the uncertain status quo. As a consequence, in some circuits, plaintiffs will be allowed to maintain private causes of action for alleged violations of federal statutes — even where the plaintiffs themselves suffered no actual injury.

If certiorari is granted, the Supreme Court’s ultimate decision will have a significant impact on the future of consumer, workplace, and other class actions. Its impact may reach other federal statutes that authorize private rights of action or statutory damages, such as the Truth in Lending Act, the Fair Debt Collection Practices Act, the Employee Retirement Income Security Act, and the Americans With Disabilities Act. If Spokeo is reversed, plaintiffs would be required to plead and establish actual injury, and not just a violation of the underlying statute. Such a result would undoubtedly limit the number of viable class actions under the FCRA and other federal statutes.

The resolution of the Spokeo petition and appeal stands to dramatically affect employers, consumer reporting agencies, and other corporate defendants. Although the United States’ opposition makes a grant of certiorari less likely, it speaks volumes that ten separate amicus briefs have been filed on behalf of seventeen different companies, trade associations, and other organizations (including the National Association of Professional Background Screeners, Chamber of Commerce of the United States, eBay, Facebook, Google, Yahoo, and leading consumer reporting agencies). Their support for resolution of the Spokeo question — whether Congress can confer standing through statute alone — may tip the scales in favor of the grant of certiorari. For the time being, employers will have to wait and see whether the Supreme Court will ultimately entertain this important question.

On March 10, 2015, the Administrative Office Of The U.S. Courts released its annual statistics, showing the number of cases filed by subject matter during the 12-month periods ending September 30, 2009 through September 30, 2014. These statistics confirm what we reported in our 11th Annual Workplace Class Action Litigation Report – FLSA collective action filings increased in 2014, and represented the largest category of employment-related class action filings. By the numbers, workplace litigation filings stayed fairly constant from October 1, 2013 through September 30, 2014, while wage & hour cases increased. By the close of that period, FLSA lawsuits totaled 8,160 (up significantly as compared to 7,500 during the prior twelve-month period). During this same 12-month period ending September 30, 2014, ERISA lawsuits totaled 7,191 (a decrease from 7,599 in the prior twelve-month period) and employment discrimination lawsuits totaled 11,937 (a decrease from 13,322 in the prior twelve-month period).

In sum, FLSA collective action litigation increased yet again in the twelve-month period from October 1, 2013 through September 30, 2014, and far outpaced other types of employment-related class action filings. These filings represented another year-after-year increase in wage & hour litigation filed in federal courts. Virtually all FLSA lawsuits are filed as collective actions, so these filings represent the most significant exposure to employers in terms of any workplace laws.

Implications For Employers

As 2015 unfolds, the question employers want to know is whether the crest of the wave is in sight for wage & hour litigation?

We follow court filings nationwide on a daily basis. If the first two months of the year is any indication of what 2015 will bring, we did not yet see the crest of the wave of FLSA collective actions.

In 2010, three women filed a class action suit against Goldman Sachs accusing it of gender bias and a “corporate culture” that allegedly favored men over women in determining pay and promotions. After protracted battles over whether Goldman could compel individual arbitration and then over the scope of discovery, the issue of class certification was finally presented to the Court. This week, in Chen-Oster, et al. v. Goldman Sachs, Case No. 10 Civ. 6950 (S.D.N.Y. Mar. 10, 2015), Magistrate Judge James C. Francis of the U.S. District Court for the Southern District of New York issued a report and recommendation response to plaintiffs’ motion and recommended that class certification be denied in its entirety.

We previously blogged about this case here, here, and here. Given the importance of the class certification ruling, it is a “must read” for corporate counsel facing employment discrimination class action litigation.

Background

Plaintiffs are current and former female Associates and Vice Presidents in three divisions of Goldman Sachs who alleged claims of gender discrimination under both disparate impact and disparate treatment theories. Plaintiffs sought to certify a class for injunctive and declaratory relief pursuant to Rule 23(b)(2) and for monetary damages under Rule 23(b)(3), and in the alternative, Plaintiffs sought to certify a class for the sole purpose of establishing liability under Rule 23(c)(4). The primary employment practices under scrutiny were the employer’s 360-review process and an evaluation tool called “manager quartiling,” in which the manager of the business unit ranks each of his or her employees by placing them in one of five quartiles.

The Report and Recommendation

The most surprising aspect of Magistrate Judge Francis’s report – which recommends denying class certification altogether – is his statement that “ . . . I would recommend that the plaintiff class be certified pursuant to Rules 23(b)(2) and 23(c)(4) in order to obtain a final determination as to the allegedly discriminatory impact of the Goldman Sachs’ employee evaluation process.” Id. at 45.

So, why didn’t he?

The answer lies in the law of the case doctrine. The opening clause of that same statement reads, “But for the fact that the law of the case doctrine dissuades me from revisiting the appropriateness of injunctive relief ….” Id. In other words, Magistrate Judge Francis denied certification as to an injunctive relief class because he felt constrained by an earlier decision in the lawsuit. That decision, issued by Judge Leonard Sand, held that because the named plaintiffs were not current employees, the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes , 131 S. Ct. 2541 (2011), obligated a finding that injunctive relief was unavailable. See Chen-Oster v. Goldman, Sachs & Co., 877 F. Supp. 2d 113, 121 (S.D.N.Y. 2012). Three subsequent decisions in the Southern District of New York have declined to follow Judge Sand’s holding, but the ruling has not been overturned, and Magistrate Judge Francis stated that “I am not writing on a clean slate; Judge Sand’s determination is entitled to deference as law of the case.” Id. at 36.

With respect to the Rule 23(b)(3) monetary damages class, Magistrate Judge Francis found that even though the requirements of Rule 23(a) were met, Plaintiffs could not meet the predominance requirement because individualized issues overwhelmed common ones. Id. at 40-44. He therefore recommended denial of the class under that Rule.

Implications for Employers

Assuming Plaintiffs challenge the ruling and file Rule 72 objections and even if the District Court were to adopt the report of the Magistrate Judge, the decision would provide limited authority for other employers seeking to defend against injunctive relief classes because of the report’s heavy reliance on the law of the case doctrine. However, with respect to a monetary damages class, the report is a useful reminder that individual causation and damages issues are often the key to defeating class certification; its holding is a very strong rebuke to theories of the plaintiffs’ class action bar seeking to impose extensive monetary liability through Rule 23(b)(3).

In Montgomery v. Kraft Foods Global, Inc., No. 1:12-CV-00149 (W.D. Mich. March 2, 2015), Judge Gordon J. Quist of the U.S. District Court For The Western District of Michigan cut the attorneys’ fee award of the plaintiff’s counsel from a requested $183,168.50 to $6,417 in a decertified class action in which the plaintiff recovered only individual damages. While not a workplace class action, this case provides employers with a tool to dramatically reduce their liability for attorneys’ fees when they defeat class or collective action certification. It also serves as a reminder of the importance of seeking to bifurcate class discovery from merits discovery, as this can eliminate exposure for the fee request of plaintiff’s counsel incurred in discovery if a class is not certified.

Case Background

Pamela Montgomery filed a putative class action complaint against Kraft Foods and Starbucks for alleged violations of the Michigan Consumer Protection Act. Montgomery, 1:12-CV-00149, at 1. Montgomery alleged that she purchased a Kraft single-serving coffee maker for the purpose of brewing Starbucks coffee. Id. She alleged that Kraft and Starbucks misled consumers like her by convincing them that Starbucks would continue to produce the single-serving component of the Kraft single-serving brewing system “for a reasonable amount of time into the future, although Defendants knew that their business relationship would soon be at an end.” Id. at 1-2.

After class discovery, the Court denied Montgomery’s motion for class certification. Id. at 2. As a result, the only remaining claim in the case was Montgomery’s individual claim that had a maximum recovery of $250 in statutory damages. Id. at 3. Because continued litigation would result in attorneys’ fees that would far exceed any potential recovery, the Court ordered Defendants to show cause as to why the Court should not order Defendants to submit an offer of judgment to Montgomery for $250 plus costs and reasonable attorneys’ fees. Id. The Defendants then submitted the proposed offer of judgment, which Montgomery accepted. Id.

Because attorneys’ fees and costs are awarded to successful plaintiffs in Michigan Consumer Protection Act litigation, Montgomery moved for an award of $174,786 in attorneys’ fees, plus costs, which she later supplemented with an additional request for $8,382.50 in fees for work performed after the offer of judgment was accepted. Id. at 8. After Defendants objected, Montgomery asked the Court to compel Defendants to produce their own billing records “to measure the legitimacy of Defendants’ objections,” and for a hearing on her fee request. Id. at 4.

The Court’s Opinion

The Court began by addressing Montgomery’s request for discovery of Defendants’ billing records. The Court found that Defendants’ billing records would not be relevant to Defendants’ objections to the fee award because Defendants’ objections were based on the sufficiency and accuracy of the billing records of Montgomery’s counsel, Montgomery’s request for fees related to Montgomery’s failed attempt at class certification, and the proposed billing rate of $350 per hour for an attorney who was in his first year of practice. Id. at *6. The Court thus denied Montgomery’s request for Defendants’ billing records. Id.

The Court also denied Montgomery’s request for an evidentiary hearing. Id at 8. Applying Michigan law, the Court found that only a party opposing a fee award has the right to an evidentiary hearing, and that it could decide the reasonableness of the fee award based on the parties’ submissions alone. Id. at 7-8.

The Court also addressed Montgomery’s fee request. It began by finding that Montgomery’s proposed $350 hourly rate was excessive, concluding that a $155 hourly rate was appropriate because it was the mean rate for first year attorneys in Michigan. Id. at 11.

The Court then turned to the most significant part of its decision – Montgomery’s request for fees for 523.34 hours of work. Id. The Court first deducted all 330.83 hours Montgomery’s counsel billed for discovery. Id. at 12. While Plaintiff’s counsel claimed that this work was “exclusive of work related to Plaintiffs’ Request for Class Certification,” the Court found that this was “not true.” Id. The Court pointed out that the case, being worth only $250 if a class was not certified, was “largely, if not exclusively, driven by Montgomery’s request for class certification,” and that therefore discovery was, as a practical matter, solely about class certification. Id. The Court then went on to point out that if Montgomery’s counsel engaged in merits discovery, he would have done so in violation of the Court’s order limiting initial discovery to class certification issues, and thus could not recover any fees for discovery even if he engaged in discovery about Plaintiff’s individual claim. Id. at 12 n.7.

The Court went on to deduct hours Montgomery’s counsel spend on other tasks to reflect Montgomery’s lack of success on her class claims. The Court cut the time Montgomery’s counsel spent on pre-complaint research from 9.9 hours to 4 hours and the time spent on drafting the complaint from 38.1 hours to 10 hours. Id. at 13. The Court went on to remove all but one of the 59.8 hours Montgomery’s counsel spent on the case after the denial of class certification because after the denial of class certification “it should have been immediately apparent to Montgomery and [her counsel] that continuing the litigation on Montgomery’s individual claim made no sense.” Id. at 14. Finally, the Court denied Montgomery’s request for fees for time spent litigating the fee petition, finding that a plaintiff’s counsel is not entitled to any fees incurred after a plaintiff accepts an offer of judgment. Id. at 14-15.

While not a workplace class action, employers who are sued in workplace class actions can use this case to support dramatic reductions in requested fee awards for plaintiff’s counsel in cases in which class or collective action certification is denied. Employers can rely on this case to show that the time spent litigating a plaintiff’s individual claims in purported workplace class actions pales in comparison to the time spent attempting to achieve class or collective action certification. It also reminds employers that they should also be sure to request to limit initial discovery in most workplace class actions to the class or collective action certification issue. Discovery is almost always the most expensive and time-consuming part of any workplace class action, and by securing a court order limiting initial discovery to class certification issues, employers can leave no doubt that class counsel should not receive any fees for time spent on discovery prior to the resolution of class certification in any case in which class certification is denied.